WASHINGTON – In case you missed it, U.S. Senator Chris Coons (D-Del.), member of the Senate Committee on Small Business & Entrepreneurship, authored an oped in The Hill on why Congress must take steps to encourage American companies to invest in research and development.
Investments in research and development are investments in American jobs
By U.S. Senator Chris Coons (D-Del.)
American businesses of all sizes depend on research and development (R&D) to create new and better products and services that allow them to grow and meet the needs of their customers. Congress should be doing everything we can to support these entrepreneurs and innovators, and while we’ve made some progress, we have more work to do. Let me explain.
Long-term investment in R&D is a growth strategy not just for a company, but also for our entire country. For the United States to remain competitive in the global marketplace, we must encourage investments in R&D that keep businesses growing, innovating, and hiring employees in the U.S. That’s why the very first bill I introduced in the Senate sought to make the R&D tax credit both permanent for companies that already use it and more accessible to small businesses, like startups, that can’t currently take advantage of it.
Instead of investing in new technologies, materials, and processes that can help them grow in the long-term, many companies prioritize immediate profits. We’ve seen this kind of shortsighted decision-making lead companies to cut jobs, merge, or outsource. This not only impacts a company’s bottom line, but also hurts the communities that built these companies over generations.
Before I ran for public office, I worked in the private sector for W.L. Gore & Associates, an advanced materials manufacturing company in Delaware, where I saw firsthand the direct connection between investing in R&D and creating jobs. Gore made research and development a priority, thanks in part to the critical R&D tax credit. These investments were essential to the company’s growth.
Unfortunately, many small businesses and startups in Delaware and across the country haven’t had access to the R&D tax credit because the credit could could only be applied against a company’s income tax. Since many of the newest and most innovative startups aren’t profitable in their early years, they don’t have an income tax liability against which to apply a credit. To me, it’s common sense that small startups should be able to access the same job-creating credit as larger companies such as Gore, DuPont, and Siemens.
Since getting anything sensible through Congress is a challenge, I fought to address this problem by partnering with Republican Senator Pat Roberts to introduce the Innovators Job Creation Act, which allows startups and small businesses to access the R&D credit by applying it against their payroll tax and their Alternative Minimum Tax.
Another flaw with the R&D tax credit was that it required reauthorization every year and was only extended retroactively. Businesses depend on long-term stability to take risks, but without a permanent tax credit, they were left not knowing if they would have access to R&D incentives in a year’s time.
These efforts finally paid off last December, when Congress passed a bipartisan tax deal that included both provisions. The R&D tax credit is now permanent and accessible to startups and small businesses. Entrepreneurs should only be limited by the reach of their ideas in the marketplace, not their creativity with the tax code.
Now more than ever, I encourage innovative and research-intensive startups to take advantage of the R&D tax credit. Companies should take the time to contact an accountant, the IRS, or local small business resources to see if they will qualify for the R&D credit when they file their taxes next year. I’ve also included some helpful information on my website, www.coons.senate.gov/r-and-d.
The good news is that we’ve made progress on the R&D tax credit. But this is just the first step in growing start-ups in Delaware and across the country. Over the last 25 years, companies less than five years old created an average of 2 million jobs per year – yet the rate of startup creation in the United States today is well below the global average, hitting its lowest level in 30 years.
That’s why Republican Senator Cory Gardner and I teamed up to introduce the Support Startup Businesses Act, which would create a pilot program that allows Small Business and Innovation Research (SBIR) program awardees to use a portion of their grants for startup-related commercialization activities.
While the SBIR program is one of the best federal programs available to small businesses looking to innovate, it doesn’t support start-up activities, which could include anything from intellectual property protection to market research to business model development. This bill will encourage startups to make decisions that are in their long-term interest, helping them avoid the pitfalls of “short-termism.”
I’m proud we’ve expanded the R&D tax credit and made it permanent, and I’m optimistic the Senate Small Business Committee will soon move forward with legislation that includes key provisions from my SBIR bill. But that’s not enough. We need to be doing everything we can to support new entrepreneurs through the challenging first years of building a business, and that’s why I’ll keep fighting in the Senate for common sense ideas like these.